Constellation brews higher profit, lifts forecast on margin growth

Reuters Staff

FILE PHOTO: Bottles of Corona beer, the flagship brand of Group Modelo, are pictured at a restaurant in Mexico City, Mexico January 27, 2017.

Reuters/Henry Romero/File Photo

(Reuters) - Constellation Brands Inc (STZ.N) posted a quarterly profit that beat Wall Street estimates for a ninth straight time and raised its profit outlook, as margins rose on the sale of more premium beers and breweries ran at peak levels in the summer.

Shares of the company are up 4 percent at $209 in early trade, hovering near an all-time high.

To take advantage of consumer tastes shifting to more unique beer flavors, Constellation has been building its premium beer business with acquisitions of independent craft brewers, such as Ballast Point Brewing & Spirits in 2015 and Florida-based Funky Buddha this past August.

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Its premium Corona and Modelo beers are also seeing increased demand due to a rising Hispanic population in the United States, analysts have said.

On Thursday, the company said beer sales rose 12.8 percent in the second quarter on strong demand for premium beers between the fourth of July and Labor day. Operating margins in its beer business rose 4.2 percentage points to 41.1 percent.

Constellation holds the license to distribute Corona and Modelo beers in the U.S. and brews most of its beers in Mexico.

The company, which also makes Robert Mondavi wines and SVEDKA vodka, lifted its full-year profit forecast to $8.25 to $8.40 per share, from a previous range of $7.90 to $8.10.

The company, however, kept its forecast for sales growth of 4 percent to 6 percent, excluding the impact of divestitures.

Net income attributable to the company rose to $500 million, or $2.48 per Class A share for the quarter ended Aug. 31, from $358.9 million, or $1.75 per Class A share, a year earlier.